Nonprofit News: Spring 2023

Nonprofit News

background Checks

Five Considerations For Background Checks Of Nonprofit Volunteers.

By: Alison Kalinski & Casey Williams

Many nonprofits are powered by dedicated volunteers, who assist with programs and special events, interact with the public, and serve as directors. However, many nonprofits overlook background checks on volunteers as an essential risk management tool, particularly for volunteers that work with children or vulnerable populations. When proper background checks are not performed on volunteers, the nonprofit can be exposed to legal, financial, and reputational harm. Accordingly, all nonprofits should have some volunteer background check processes and the following five factors should help in developing or refining the right processes for your organization:

1. Which volunteers should get a background check?

When initiating a background check plan, consider which volunteers should undergo background checks. Background checks are a must for volunteers that work with children and, in some cases, may even be required by law. For example, as of January 2022, criminal background checks are required under California law for all “regular volunteers” of any “youth service organization” in order “to identify and exclude any persons with a history of child abuse.” (Cal. Bus. & Prof. Code § 18975).1 A “youth services organization” is an

1 Please note that this law was amended in September 2022 in two ways:

1. Until January 1, 2024, youth service organizations that prior to January 1, 2022 did not require administrators, employees, or regular volunteers to undergo background checks are excluded for the background check requirement; and

2. An organization that provides one-to-one mentoring to youth that has adopted and implemented policies requiring administrators, employees, and regular volunteers to undergo training for identification and reporting of child abuse and neglect and has adopted and implemented policies to ensure comprehensive screening of

organization that employs or utilizes the services of administrators or employees of a private youth center, youth recreation program, or youth organization who are mandated reporters. A “regular volunteer” is a volunteer aged 18 or older who has direct contact with, or supervision of, children for more than 16 hours per month or 32 hours per year. Nonprofit youth organizations operating in California should consult with counsel about complying with this new law.

Even if your organization and volunteers do not fall into this law, background checks are essential for all volunteers that work with children or vulnerable populations to help flag potential abusers. Your nonprofit can also evaluate the benefits and risks for requiring additional volunteers to undergo background checks. For example, requiring background checks for a large scale event with many volunteers – such as a beach clean-up or a one day soup kitchen – may be too impracticable. On the other hand, for a committed volunteer working regular hours in the office, a background check may be easily implemented.

2. How to conduct a background check

There are many tools that can be used to conduct a background check. Which and how many tools to use will depend on the nature of the position and qualifications needed of the position. Background check tools include, for example, reviewing a resume, verifying information in an application (e.g., education and licenses), calling references, reviewing social media history, and checking for disqualifying criminal convictions.

Regardless of the type of tools being used, before conducting a background check, a nonprofit should obtain a signed written authorization from the volunteer applicant to inform them of the types of information that is being sought and to obtain their consent for the volunteers, training of volunteers and parents or guardians, and regular contact with volunteers and parents or guardians.

background check. Different types of authorizations and disclosures may be needed, depending on the type of tools being used. For example, extensive authorizations and disclosure are needed to pull credit reports, and counsel should be consulted before using that kind of tool.

3. Privacy protection

Nonprofits should take steps to guard the privacy of volunteer applicants when conducting background checks. Nonprofits should conduct their background checks in a focused matter to obtain only information relevant to whether the applicant is qualified and safe to volunteer. Once that information is gathered, the nonprofit should implement steps to limit access to the information on a need-to-know basis. Failing to do so could lead to potential violations of privacy laws.

4. Establish policies and publicize volunteer requirements

Nonprofits should develop written policies and procedures explaining how it will screen volunteers, then publicize those requirements. For example, if a nonprofit posts its background check requirements on its website, it may deter a problematic volunteer from applying.

Established volunteer screen policies can also help nonprofits create trust in the community. Nonprofits can build on that trust be developing other appropriate volunteer policies and procedures, such as volunteer handbooks, training for volunteers on abuse prevention, safety procedures, and codes of conduct. These policies and guidelines can help develop and reinforce

new to the Firm!

partnerships with the public and the community the nonprofit serves.

5. Consider screening potential board members

Board members are some of the most important volunteers of a nonprofit. Board members are often established professionals with deep ties to the community. For this reason, many nonprofits do not want to offend potential candidates with intrusive checks and believe it is unnecessary. However, a more extensive background check may be warranted for board positions where a person may have access to funds. This may be particularly important at smaller organizations where there are often fewer internal controls and more reliance on volunteer working boards.

For boards at larger nonprofits, reviewing a resume and interviewing a potential candidate may be sufficient to evaluate whether the potential candidate fits into the organization’s compositional matrix for Board diversity, skills, and experiences. For organizations working with children, it may be imperative to convey to the community how seriously the organization takes safety by having directors participate in the same background processes as regular volunteers. Thus, each nonprofit should have its own individualized approach to vetting potential board members, tailored to the needs and work of the organization.

Evaluating these five factors will help your nonprofit find its own method for conducting volunteer background checks. This will help your nonprofit focus on completing its mission while also mitigating risks and protecting the organization and the community it serves.

Jenai Howard, an associate in the San Francisco office, advises clients on education, labor and employment matters. Prior to joining LCW, Jenai worked as a Research Assistant for two Professors at Santa Clara University School of Law where she conducted various kinds of legal research and co-authored a Criminal Law casebook.

Kimberly Horiuchi, an associate in the Sacramento office, works primarily in the Firm’s Litigation practice group where she represents clients in employment litigation matters. She also focuses on providing trusted advice and counsel to organizations throughout the State and has extensive experience in conducting workplace investigations.

Court Finds That Employer’s Decision To Terminate Employee Could Have Been Motivated By Employee’s Disability.

Suchin Lin was hired by Kaiser Foundation Hospitals (Kaiser) in June 1999 and worked for Kaiser in various positions through 2019.

In May 2017, Lin worked as a Software Quality Assurance Associate Engineer in the Innovation and Transformation (I&T) department, one of eight departments within Kaiser’s Technology Risk Organization (TRO). She received positive performance evaluations in this position in March 2018.

In December 2018, the TRO organization began to plan to lay off certain employees for economic reasons and TRO directors were asked to select employees to be included on a list of potential layoffs. The I&T executive director said he chose to eliminate Lin’s position because she was struggling in performing her duties and not getting up to speed as quickly as expected. However, the Court of Appeal noted that contemporaneous documentary records did not reflect these concerns about Lin’s performance. In January 2019, Lin fell in the workplace and suffered an injury to her left shoulder. Lin’s doctor placed her on modified duty for the next month, with restrictions requiring Lin to use a sling, limit use of her left arm, and given time to attend medical and physical therapy visits.

On January 29, 2019, Lin’s supervisor completed numerical ratings of employee competencies for the members of the I&T team as part of the 2019 TRO layoffs. Lin’s supervisor rated Lin with the lowest ratings on the team. The same day, Lin’s supervisor discussed Lin’s performance with human resources, noting that Lin was slow at typing, and would be slower with this injury. Lin’s doctor extended Lin’s modified duty through the end of March. On February 27, 2019, Lin’s supervisor met with Lin and discussed that Lin’s “unavailability” had occasionally forced her teammates to complete tasks for her and that her “pace of execution needs improvement.” Lin was placed on an

action plan, requiring her to manage her tasks within a reasonable time. Lin testified that her supervisor pressured her to work unpaid overtime off the clock. In the wake of this meeting, Lin sent written complaints to human resources about the pressure to work unpaid overtime off the clock, causing her such emotional distress that she could not sleep. Human resources referred her to the employee assistance program, which ultimately led to her referral to a psychiatrist.

In March 2019, Lin met with her supervisor about her 2018 year-end performance evaluation. Lin was again rated “successful,” but her supervisor included notes that she was on the “lower end” of successful and needed improvement in several subcategories. Lin then went on medical leave through May 19, 2019. On April 24, 2019, Kaiser notified Lin that her position had been eliminated and her employment would be terminated effective June 23, 2019.

Lin sued Kaiser alleging disability discrimination, retaliation for requesting accommodations, failure to accommodate, failure to engage in the interactive process, and wrongful termination. Kaiser moved for summary judgment, arguing that the decision to eliminate Lin’s position occurred due to the reduction in force in December 2018, before Lin sustained her disability. Lin did not dispute that her name was selected for the initial reduction in force list in December 2018, but argued that evidence showed this proposed list was subject to further review, and Kaiser gradually reduced the list from 31 employees to the 17 who were ultimately laid off. Lin also argued that her termination was a result of her supervisor’s post-disability assessment of her and the email rating from January 29, 2019. She argued these ratings and evaluations were based on her disabilities and requests for accommodations. Lin’s supervisor never assigned her lighter tasks or discussed other possible accommodations to help her overcome her disability-related pace issues.

The trial court agreed with Kaiser and granted summary judgment in Kaiser’s favor. The trial court said the decision to terminate Lin’s employment was due to the ongoing reduction in force process and that all accommodations sought were granted.

The Court of Appeal disagreed. They found that Kaiser’s initial placement of Lin on the December 2018 reduction in force list was not discriminatory as it occurred before her disability arose. However, Kaiser’s decision to leave Lin on the reduction in force list and ultimately terminate her employment could have been based, at least in part, on Lin’s disability. The Court of Appeal considered Kaiser’s evaluation of Lin in January 2019 and noted that a reasonable jury could conclude that when Kaiser was collecting this information, it did so to determine whether to proceed with Lin’s termination.

The Court of Appeal found that a reasonable jury could find that Lin’s termination was substantially motivated by her disability because there was little evidence in the record that Lin was performing her job negatively prior to her disability. It was only after Lin’s disability that her supervisor judged her performance more harshly in comparison to her teammates.

The Court of Appeal reversed the judgment and remanded the case to the trial court.

Lin v. Kaiser Foundation Hospitals (2023) 88 Cal.App.5th 712.

Note:

Nonprofits should remember that layoffs can still serve as the bases for employment claims including disability discrimination claims. While employers can use performance as a criterion to determine which employees to select for layoff, using performance as a criterion may be risky if the employer does not have adequate performance documentation. Employers should reconsider using performance as a layoff criterion unless the employer has accurate, thorough and contemporaneous documentation of performance issues and also conducted regular performance reviews.

Did You Know?

On February 9, 2023, the U.S. Department of Labor, Wage and Hour Division issued an Opinion Letter on Family and Medical Leave Act (FMLA) Leave. The letter responds to an employer’s request for an opinion concerning whether FMLA entitles an employee to limit their workday to eight hours a day for an indefinite period of time because of a chronic serious health condition, where that employee normally works more than eight hours a day. The employer stated that it is standard for employees to work and be scheduled for a workday that is more than eight hours a day because of 24-hour coverage needs in that department. The employer felt that this type of work restriction was “better suited” as a reasonable accommodation under the Americans with Disabilities Act (ADA).

The opinion letter advises that an eligible employee with a serious health condition that necessitates limited hours may use FMLA leave to work a reduced number of hours per day (or week) for an indefinite period as long as the employee does not exhaust their FMLA leave entitlement and they continue to have a qualifying reason for leave. This means that if an employee never exhausts their FMLA leave, they may work the reduced schedule indefinitely.

The letter also reiterates that the amount of leave an employee is entitled to is based on the employee’s workweek. Therefore, if an employee is regularly scheduled to work more than 40 hours per week, they are entitled to more than 480 hours of FMLA leave per 12-month period. For example, an employee entitled to work 50 hours per week would be entitled to 600 hours of FMLA leave in a 12-month period.

Finally, the letter states that the requirements and protections of the FMLA are separate and distinct from those of the ADA, meaning that an employee can invoke the protections of both laws simultaneously. For example, if an employee has exhausted their FMLA leave and needs to work a reduced schedule, that employee may have additional rights under the ADA.

Note:

This opinion letter shows that a nonprofit’s obligation to provide FMLA leave can continue indefinitely and that a nonprofit has a simultaneous duty to reasonably accommodate an employee under the ADA.

ministerial exception

Religious Institution Given Autonomy To Remove Employee From Residential Program Under Ministerial Exception.

San Francisco Zen Center is the largest Soto Zen Buddhist church in North America. The Center is a religious training institution and offers several different types of programs for individuals interested in learning about and training in Zen Buddhism. Some programs are offered to the general public, while other programs are reserved for those who live full-time at the temple and are part of a residential program. Residents participate in both “formal practice” and “work practice.” Formal practice includes morning and evening meditations, as well as services, tasks, classes, and events. Work practice includes cooking, dishwashing, bathroom cleaning, preparing guest rooms, and participating in ceremonial tasks. Both formal and work practices are necessary parts of the Zen Buddhist practice. Attendance at formal practice and work practice is mandatory.

Alex Behrend learned about the Center by searching online for volunteer opportunities after he suffered serious injuries in a car accident and had been diagnosed with post-traumatic stress disorder

(PTSD). Due to his injury, Behrend could not work in his previous career, which made it difficult to afford stable housing. Behrend continued to volunteer and participate in programming as a non-resident. In 2016, Behrend was given one month’s notice of losing his housing and the Center’s head of practice encouraged Behrend to apply for the residential program. Behrend was part of the residential program as a guest student, and later as a Work Practice Apprentice. He received room, board, and a stipend. For his work practice assignment he checked guests into lodging, handled and processed payments, prepared guest rooms, prepared conference rooms and event spaces, cleaned and folded laundry, answered guests questions. Later, Behrend was assigned to the kitchen where he cooked and washed dishes.

In September 2018, the Center reassigned Behrend to the maintenance crew, but that work exacerbated his PTSD symptoms and when he sought employment on another work crew, his request was denied. Behrend alleged that the Center’s course of dealing after September 2018, including demanding he move out in January 2019, was disability discrimination in violation of the Americans with Disabilities Act (ADA). He also alleged disparate treatment, failure to engage in the interactive process, failure to provide reasonable accommodation, retaliation, and termination.

The Court noted that state interference with churches and other religious institutions violates the free exercise clause of the Constitution, and that this clause protects a religious institution’s autonomy with respect to internal management decisions that are essential to the institution’s central mission. A component of this autonomy is the selection of individuals who play certain key roles. Arising from these principles is the ministerial exception. Under this rule, courts are bound to stay out of employment disputes involving those individuals holding certain important positions with churches and other religious institutions.

The Court found that if an employee is performing “vital religious duties,” they are more likely to hold an important position within the religious institution. Here, Behrend was a Work Practice Apprentice, and fulfilled both the formal practice and work practice requirements. He was practicing and training in Soto Zen Buddhism and spent nearly all of his time at the Center involved in the practice of Soto Zen Buddhism. The fact that Behrend did not have a leadership role did not alter the Court’s conclusion that Behrend held an important position because the ministerial exception does not apply only to leaders of the faith. The Court determined that training in both the formal practice and work practice lies at the very core of the mission of the Center. The Court found the

residential program was undisputedly a part of religious training and therefore implicated the ministerial exception. The Court found it would be a direct interference with a religious institution’s constitutional right to decide matters of faith if it were to command the Center to continue to house and train a particular person in the practice of the faith. The Court granted the Center’s motion for summary judgment.

Note:

This case is illustrative of the autonomy that religious institutions and religious nonprofit organizations maintain in making employment decisions that impact employees who serve a ministerial function.

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Five Top Wage and Hour Issues for California Nonprofit Employers

Tuesday, May 2, 2023 | 2:30 - 3:30pm

Navigating California’s complex wage and hour laws is challenging, particularly for California nonprofits, who often run into compliance problems, despite the best intentions. Noncompliance can be very expensive, resulting in steep penalties, large awards of damages, and costly litigation.

Join LCW for a complimentary webinar to learn about five common wage and hour issues nonprofits encounter and steps they can take to reduce risk and enhance compliance. We will discuss unique California issues relating to overtime exemptions, meal break requirements, payment of final wages, and timekeeping requirements. Team members who will benefit from attending include HR Directors, Chief Operating Officers, Compliance/Risk officers, Controllers/ CFOs, and other finance leaders with HR oversight.

This presentation is indicative of workshops we regularly present to our 33 Consortiums across the state. Following the presentation we will talk about our Educational Resource Consortiums (Consortium) and our plans to form one dedicated to California’s nonprofits.

Alexander Behrend v. San Francisco Zen Center, Inc., et al. (N.D. Cal., Feb. 14, 2023) 2023 WL 1997919.

construction corner

LCW represents and advises nonprofit organizations in various business, construction, and facilities matters, including all aspects of construction projects from contract drafting and negotiations to course of construction issues. Through this Construction Corner, LCW will be giving nonprofits helpful tips on a variety of topics applicable to construction projects. LCW attorneys are available should you have any questions or need assistance with any construction projects no matter what phase you may be in currently.

Five Things To Consider When Contracting With An Architect

By: Victoria M. Gómez Philips

When undertaking a construction project, a nonprofit likely requires a design professional, such as an architect, to assist in the planning, development, design, and construction of a project. These design professionals tend to present the nonprofit with AIA contracts that favor the design professional and do not align with the California construction laws. The nonprofit should take the following into consideration prior to executing a contract with a design professional:

• The architect should represent that he or she is licensed with the California Architects Board. The city or county will only issue a building permit if the architect who prepared the plans and specifications certifies that they are properly licensed by the State of California.

• Architect contracts very rarely include many provisions that address the construction phase. Nonprofits should dictate what they expect from the architect during construction and the scope of work should align with the construction agreement. If the scope of work is not clear, the architect may charge the nonprofit for hourly services in order to perform services during the construction phase, such as reviewing submittals and pay applications.

• The indemnification language must conform with California law. In California, a design professional may only indemnify the nonprofit to the proportionate extent the claims relate to the design professional’s negligence, recklessness or willful misconduct.

• The contract should address the ownership of the documents developed by the architect. The nonprofit needs ownership of the instruments of service (plans and specifications) or an irrevocable, perpetual license to use the documents developed by the architect under the agreement in the future in order to maintain, complete or make any alterations to the construction project.

• The design professionals’ authority to file a lien on the property should also conform to California law. An architect’s lien is limited to the remaining amount of the design professional’s fee for services provided under the contract, or the reasonable value of those services, whichever is less. The architect must satisfy each of the conditions outlined in Civil Code Section 8304 prior to filing a lien against the real property.

Many AIA and other form contracts address these issues but these forms do not clearly conform to California laws. When presented with a design professional contract, the nonprofits should consult with legal counsel to modify the contract provisions to ensure the nonprofit’s interests are protected.

Best practices

RAFFLES:

• Qualified tax-exempt organizations, including nonprofit organizations, may conduct raffles under Penal Code Section 320.5.

• In order to comply with Penal Code Section 320.5, raffles must meet all of the following requirements:

Each ticket must be sold with a detachable coupon or stub, and both the ticket and its associated coupon must be marked with a unique and matching identifier.

Winners of the prizes must be determined by draw from among the coupons or stubs. The draw must be conducted in California under the supervision of a natural person who is 18 years of age or older.

At least 90 percent of the gross receipts generated from the sale of raffle tickets for any given draw must be used to benefit the nonprofit or provide support for beneficial or charitable purposes.

AUCTIONS:

• The nonprofit must charge sales or use tax on merchandise or goods donated by a donor who paid sales or use tax at time of purchase.

Donations of gift cards, gift certificates, services, or cash donations are not subject to sales tax since there is not an exchange of merchandise or goods.

Items withdrawn from a seller’s inventory and donated directly to nonprofits located in California are not subject to use tax.

ƒ E.g., if a business donates items that it sells directly to the nonprofit for the auction, the nonprofit does not have to charge sales or use taxes. However, if a parent goes out and purchases items to donate to an auction (unless those items are gift certificates, gift cards, or services), the nonprofit will need to charge sales or use taxes on those items.

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The ABC Test Does Not Apply To Expense Reimbursement Claims.

By: Stephanie J. Lowe

Fred Bowerman was a vendor for Field Asset Services, Inc. (FAS), which was a business engaged in pre-foreclosure property preservation. Under Bowerman’s contract with FAS, he was required to cover his own business expenses. Bowerman filed a lawsuit on behalf of himself and other class members alleging FAS willfully misclassified them as independent contractors rather than employees. One of his claims was the misclassification resulted in FAS’s failure to reimburse him for business expenses.

In March 2017, the district court granted partial summary judgment in favor of Bowerman by finding that the class members had been misclassified as independent contractors and FAS was liable for failing to pay their business expenses. The district court relied on the common law test for distinguishing between employees and independent contractors from S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (Borello test). The Borello test primarily considers whether the hiring entity has the right to control the manner and means of the work and then assesses a number of secondary factors about the service relationship

After FAS appealed the district court’s decision, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 in 2018, which established the ABC test for distinguishing between employees and independent contractors. The ABC test presumes a worker is an employee and only finds that a worker is an independent contractor if:

(A) the worker is free from the control and direction of the hirer;

(B) the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) the worker is customarily engaged in an independently established trade, occupation, or business.

The Ninth Circuit held FAS’s appeal in abeyance pending Dynamex. On appeal, FAS argued that the Borello test, and not the ABC test, applied to Bowerman’s reimbursement claim. The Ninth Circuit agreed with FAS. Bowerman’s expense reimbursement claims were based on Labor Code section 2802, which requires employers to indemnify (or reimburse) employees for all necessary expenses incurred in the discharge of duties.

The Ninth Circuit held that Dynamex only applied the ABC test to wage order claims. Since Bowerman’s expense reimbursement claim was rooted in Labor Code Section 2802 and not a wage order, the ABC test did not apply to determine whether class members were employees for purposes of determining whether they were entitled to business expenses reimbursements. Thus, the Borello common law test, and not the ABC test, applies to the expense reimbursement claims. The Ninth Circuit further assessed that there was evidence of both an independent contractor and employee relationship under the Borello test and reversed the district court’s decision that class members had been misclassified.

Bowerman v. Field Asset Services, Inc. (9th Cir. 2022) 39 F.4th 652, amended February 14, 2023.

NOTE:

After the Dynamex case, the Labor Code was amended to apply the ABC test beyond the wage orders, although not to expense reimbursement claims. The ABC test applies to employment status for Workers’ Compensation coverage and Unemployment Insurance coverage.

ACA Compliance Question: Cash in Lieu

Did you know that cash in lieu of health insurance can affect whether your agency offers affordable minimum essential coverage? Cash in lieu is added to the employee’s required contribution for purposes of calculating affordability. The one exception is where cash in lieu is conditioned on an “eligible opt-out arrangement.” To learn more about what constitutes an “eligible opt-out arrangement,” reach out to us.

criminal background checks

Federal Fair Credit Reporting Act Does Not Preempt State Law.

Under the federal Fair Credit Reporting Act (FCRA), an agency may report a person’s prior conviction to a prospective employer no matter how long ago it occurred. However, under California’s Investigative Consumer Reporting Agencies Act (ICRAA) and the California Consumer Credit Reporting Agencies Act (CCRRA), an agency is prohibited from reporting a “conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.” Generally, a state can offer greater protection to a consumer than the federal government.

Sometime in 2011, R. Kemp (Kemp) was convicted of a crime and released on December 11, 2011 on parole. In December 2014, Kemp’s parole ended.

In March 2020, Amazon offered Kemp a job in Sacramento, pending a background check. The consumer reporting agency, Accurate, provided Amazon with a report, which included information about Kemp’s 2011 conviction. As a result, Amazon withdrew its offer of employment. Kemp filed a class action lawsuit against Accurate alleging Accurate (1) violated the ICRAA, (2) violated the CCRAA, and (3) violated of the state’s Unfair Competition Law (UCL). Accurate moved to dismiss the case, arguing that the federal FCRA preempted Kemp’s state ICRAA claim. Accurate also argued that the phrase “from the date of parole” in the ICRAA refers to the end of parole. The trial court denied Accurate’s motion as to the parole

issue but granted the motion as to the preemption issue. The parties appealed.

The Court of Appeal explained the statutory framework of the ICRAA and the CCRAA. Both statutes were modeled after the FCRA and were intended to serve complementary, but not identical, goals as the federal statute. The ICRAA and CCRAA have similar purposes to ensure consumer reporting agencies “exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” Under the ICRAA, a consumer report is a report bearing on a consumer’s character and general reputation. Under the CCRA, a consumer credit report is a report bearing on a consumer’s credit worthiness, credit standing, and credit capacity. Under the FCRA, there is no distinction between the two types of reports.

Because the information in the two reports overlap, the ICRAA and the CCRAA may apply to the same report. Under the ICRAA and the CCRAA, agencies are prohibited from reporting “records of arrest, indictment, information, misdemeanor complaint, or conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.”

The Court of Appeal rejected Accurate’s argument that the phrase “from the date of parole” means the date of the end of parole. The Court of Appeal explained under California law, the parole date, or the date of parole, refers to the date of an inmate’s release, or the start date of their parole. In other words, the period of parole begins when an inmate is released from prison. Therefore, the ICRAA and CCRA prohibit an agency from reporting a person’s criminal conviction that predates a report by more than seven years as measured from the start date of parole, and not the end of parole.

The Court of Appeal also examined past policy guidance by the Federal Trade Commission, which enforces the FCRA. The guidance stated that the seven year reporting period runs from the date of parole, and if a consumer is convicted of a crime and sentenced to confinement, the date of release or placement on parole controls. While the guidance is not controlling, the Court of Appeal did find it informative interpreting the ICRAA and the CCRA.

The Court determined that Kemp went on parole in 2011, which predated Accurate’s 2020 report by more than seven years in violation of the ICRAA and CCRA.

The Court of Appeal also rejected Accurate’s argument that the FCRA preempts the ICRAA. The Court of Appeal found the FCRA expressly preempts state law in the statute itself: The FCRA states that it preempts (1) state consumer reporting statutes if the state law took effect after September 30, 1996, and (2) when the state statute regulates the disclosure of convictions in consumer reports. Here, the ICRAA was enacted in 1975. Therefore, the ICRAA did not take effect after September 30, 1996, and is not expressly preempted in the FCRA.

Moreover, the Court of Appeal held that the ICRAA does not conflict with the FCRA. State law is only preempted if it is in direct conflict with federal law such that compliance with both is impossible, because the state law impedes the purposes of Congress. Here, a consumer reporting agency can comply with the ICRAA by not reporting a consumer’s conviction that predates an investigative report by more than seven years without violating the FCRA, which allows for, but does not require, the reporting of such convictions. The ICRAA’s prohibition against reporting convictions older than seven years is not an obstacle to the purposes and objectives of Congress; rather, it is entirely consistent with the

consumer protection goals of the FCRA. And as the Court of Appeal noted, the ICRAA was modeled after the FCRA.

Kemp v. Superior Ct. of Orange County (Cal. Ct. App. Dec. 22, 2022) 2022 WL 17843980.

Note:

This case is a reminder that nonprofit organizations should establish reasonable procedures to ensure compliance with the FCRA and the ICRAA, even when using a vendor to perform background checks, to avoid potential liability.

Consortium Call Of The Month

As part of the consortium, registered nonprofits can receive 12 hours of complimentary telephone consultations with LCW’s nonprofit attorneys! Here are real consortium questions LCW attorneys recently answered:

Question: Answer:

An employer is in need of an investigator. A board member referred the nonprofit to an out-of-state attorney who has experience conducting investigations. The nonprofit asked if there would be any issues with using an out-ofstate attorney to conduct an investigation.

The attorney advised that the California Business & Professions Code regulates who can conduct investigations. With few exceptions, such as being a California licensed investigator, only attorneys who are members of the California State Bar are permitted to conduct investigations. Therefore, if the out-of-state attorney were licensed to practice law in California, the attorney could conduct the investigation. If not, the California Business & Professions Code would preclude the attorney from conducting the investigation. The attorney further explained that the Business & Professions Code imposes penalties if a person knowingly engages an unauthorized individual to conduct an investigation. Nonprofit employees, however, are permitted to investigate claims of misconduct at the organization.

LCW is thrilled to be launching our 35th consortium this July! This consortium is dedicated specifically for California Nonprofit organizations. The consortium will receive:

• Three workshops to which they may send as many people as they would like

• Recordings of the workshops that they may access and share internally for three months

• Access to our growing resource Library

• Twelve (12) hours of complimentary telephone consultation

• A copy of our Nonprofit News, an LCW newsletter published quarterly

• Ability to attend the other 34 consortium’s workshops at no additional charge (space permitting)

• Discounts on other LCW sponsored webinars and events

Question:

Governor Newsom recently signed a handful of holiday bills into law, including Genocide Remembrance Day, Juneteenth, Native American Day, and the Lunar New Year. A nonprofit employer asked if they should add these holidays to their list of observed holidays.

Answer:

The attorney advised that Juneteenth and the Lunar New Year are now recognized holidays for state employees, Native American Day is a recognized holiday for court employees in California, and Genocide Remembrance Day allows public schools and community colleges to close on that day. The attorney advised that, while nonprofit employers are welcome to observe these holidays, unless an employer has agreed to recognize these holidays in their handbook, employment contracts, or otherwise taken formal action to recognize the holidays, there is no requirement to adopt these holidays. The fact that there is a statewide holiday is binding on the state agencies listed above, but not other entities such as private nonprofit employers.

The attorney advised that there may be other reasons a nonprofit employer wants to adopt some or all of these holidays. For example, many private nonprofits observe Juneteenth as a matter of policy and especially given the surge of awareness around racial justice issues and the significance of the holiday, but there is no legal requirement to do so. The nonprofit could also consider its population. For example, if employees are requesting the nonprofit close for the Lunar New Year so that they can observe that holiday, that could be a factor to considering in deciding whether to recognize the Lunar New Year as an observed holiday. Another factor to consider is that if the nonprofit only selects to observe some of these holidays and not others, employees could feel the nonprofit prioritizes certain populations over others. Finally, the nonprofit may have several observed holidays or closure periods, and may decide that it does not want to add any extra days off.

The attorney advised that if the nonprofit was interested in updating their list of holidays, the nonprofit would likely need to update their employee handbook and provide a communication to employees about the changes.

Liebert Cassidy Whitmore